New Forecast from the World Bank for the Turkish Economy

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The World Bank has kept its forecast for global economic growth at 2.7% for this year and next year.

The Bank published the January 2025 edition of the Global Economic Prospects Report. The report stated that global growth has stabilized due to inflation approaching targets and monetary expansion supporting activity in both developed and emerging market economies.

GROWTH EXPECTATION OF 2.7% RECORDED FOR 2025 AND 2026

Emerging economies are facing the weakest long-term growth outlook since 2000.

The report indicated that the global economy is on track to remain at a low growth rate that will be insufficient to promote sustainable economic development, highlighting increasing policy uncertainty, adverse changes in trade policies, geopolitical tensions, persistent inflation, and risks arising from climate-related natural disasters.

The report predicted that emerging economies, which account for 60% of global economic growth, would complete the first quarter of the 21st century with the weakest long-term growth outlook since 2000, and even if the global economy stabilizes in the next two years, it is expected that emerging economies will make slower progress in catching up with the income levels of developed economies.

The report noted that growth in emerging economies is expected to remain around 4% over the next two years, which would be a weaker performance compared to pre-COVID-19 levels and would be insufficient to promote the necessary progress in reducing poverty and achieving broader development goals.

The report emphasized the need for global policy efforts to protect trade, address debt vulnerabilities, and combat climate change.

US GROWTH FORECASTS RAISED, EURO AREA'S LOWERED

The report also included growth forecasts for countries, stating that the growth forecast for the US economy has been raised from 1.8% to 2.3% for this year and from 1.8% to 2% for next year. The report pointed out that the timing and magnitude of potential changes in US trade and fiscal policies are uncertain, noting that a 10% increase in tariffs applied by the US to all its trading partners could reduce global growth by 0.2 percentage points compared to baseline forecasts, assuming no retaliatory measures. This could increase further when retaliations are taken into account.

The report stated that the growth expectation for the Euro Area economy has been lowered from 1.4% to 1% for this year and from 1.3% to 1.2% for next year. It was noted that the growth forecast for the Chinese economy has been raised from 4.1% to 4.5% for this year, while the growth expectation for the country’s economy for next year has been maintained at 4%.

THE TURKISH ECONOMY IS EXPECTED TO GROW BY 2.6% THIS YEAR

The report indicated that the Turkish economy is expected to grow by 2.6% this year and 3.8% next year.

The World Bank had predicted in its June 2024 forecasts that the Turkish economy would grow by 3.6% in 2025 and 4.3% in 2026. The report stated that Turkey's external imbalances have improved, the current account deficit has narrowed sharply, international reserves have increased, and the risk premium has decreased, contributing to a significant reduction in country spreads.